Erdogan’s questioned victory will bring, among other things, important consequences on Turkey's economy. One of them will be its isolation from Europe.
Even if international authorities are questioning the results of the referendum in Turkey, there’s no doubt that the victory of President Recep Tayyip Erdogan will have major consequences in the political and economic landscape of the country. With a stagnated economy since 2012, Turkey has lost the momentum it had on the last decade and now it depends on the economic ties with de European Union, the United States and, more importantly, NATO.
The political climate in Turkey has, definitely, affected its economic potential. Not only it has intensified corruption but also has slowed down growth and economic expansion. Between 2002 and 2007, the growth rate was of 6,8%. Since then, it decreased to 3,5% and the predictions for 2017 put it below 3%. Aside from the overall impact on growth, instability and conflict has also had its toll on tourism. In recent years, it’s clear that Europeans think twice before traveling to Turkey. Since it’s a country that relies on tourism, the effect is far from negligible.
Will the referendum help on any of these issues? Or will it bring down even more the economy?
First, let’s examine the relation of Turkey with its more important “allies”. NATO, the United States and the E.U. have been patient with Turkey, since it was one of the best emerging markets. However, since the situation has turned, Turkey political flaws are what the world it’s criticizing –with reason–. With Erdogan’s victory, which clearly inclines the country towards an authoritarian state, the E.U. will show major concerns and, in spite of possible economic ties, they will question any decision made by the president. The same goes for the U.S. and NATO, who have endured during Erdogan’s campaign due to Turkey’s strategic location in the fight against the Islamic State. If the president of Turkey makes any unpopular decision, the relation will be greatly damaged.
Now, will the economic development of Turkey stand a chance in an authoritarian state? Even if it sounds counterintuitive, there is a chance that the results of the referendum will have a positive impact on Turkey’s economy. So far, instability has been one of the key obstacles for economic growth. If Erdogan, however controversial his rule may be, establishes some stability, it’s likely that Turkey’s institutions can progress. We also have to take into account the fact the Erdogan needs to be elected in 2019 and only then he’ll have his new powers. This calls for a campaign from his side to try and regain popularity in the main cities of Turkey.
Clearly, we can’t dismiss the possibility that the new powers of Erdogan won’t do anything to improve the economy. Corruption will still hinder economic growth; foreign markets will remain dubious about nurturing relations with Turkish companies; and it’s highly likely that Erdogan won’t promote conciliatory actions. Not a pretty picture for foreign investment and economic development.
The outcome of the referendum didn’t come as a surprise. If any, the surprise was that the margin between “Yes” and “No” was much smaller than expected. However, the economic consequences may surprise the people from Turkey, who expect the all-powerful Erdogan to get the country back on its glory days.